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06/26/2006

Response on Privatizations-BECKER

I will briefly respond to some of the interesting comments.
Many politicians oppose privatizations because of the opposition from employees of the enterprises that might be privatized. Employees have opposed every single privatization that I am familiar with. The reason is clear: public companies have too many employees from an efficiency perspective, and the employees know this. Also they have to work harder for lower pay when their enterprise becomes private.
Windows has a large share of the market, but Apple, Linus, and other systems limit the power of Microsoft's Windows. Microsoft's power is in my judgment rapidly declining in the overall computer-internet market. This is one of the best examples of the difference between static and dynamic competition.
The USPO illustrates the worst of public monopolies. It has lagged virtually all the important mail delivery innovations in recent decades. It is grossly overmanned, and its employees are often surly and unpleasant. The need to subsidize mail sent to remote places is no justification for a public monopoly. Such mail can be subsidized-if that is desirable- without having a public monopoly. Simply subsidize Fed Ex or any one else for their deliveries to such places. Take away the protection of the law and subsidies, and the USPO would collapse within a short time.
Many public institutions in higher education offer very fine products, but that is because they face stiff competition from each other and from private universities. Eliminate that competition-as in Germany, France, or Italy- and one sees how ineffectual public universities become.
Phone service has become much cheaper, not more expensive, since the telephone market was opened up. It is far cheaper to make long distance calls, including international ones, than it was before. Imagine what the phone system would be like if ATT still had a monopoly: where would wireless, cable, and Internet telephony be? ATT would have used its political power to resist and handicap every one of these and other innovations.

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Interesting. No more comment :).
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